How To Save More For Retirement If You Don’t Make Much Money

Want to save more for retirement? Good. People are not saving enough while working, which will hurt them when they are old. The key to saving more for retirement is properly forecasting your future.

By the time you’re old, tired, and unmotivated, you want to have saved up enough passive income to cover your living expenses. If you don’t, you’ll have to mainly rely on Social Security and draw down savings. It’s too bad more people don’t think about their retirement future until it’s too late.

Target Amounts To Save For Retirement By Age

  • Save $1 million by age 50
  • Save $2 million by age 60

These are the rough estimates for what I think everybody needs to save for retirement to have a reasonable attempt at a comfortable retirement. Of course these figures aren’t set in stone and there are many other things you can do to help your retirement quest. I advise keeping an open mind and using these figures as targets.

If you read the comments from my “401K amount by age” article, you will notice that those in their mid-30s and below tend to disagree with these amounts, while those older generally agree, verify, and accept.

The reality is, inflation is too big of a beast to ignore. Due to inflation, your money is buying you less and less over time. As a result, it’s important to invest as early, as much, and as often as possible. The longer you invest in core risk assets like stocks and real estate, the better.

Save More For Retirement Early And Make It A Habit

I don’t know why younger folks aren’t willing to follow along. It’s often times just rebel and justify why they aren’t saving.  “Live life!“, they say.  True, but who says you can’t live life while saving?  

The easiest way to learn, is to listen to an older person who has gone through what you will go through. Perhaps it’s immaturity, or the way things are where every generation needs to question the next generation and the status quo.

There’s really no mystery to money. The more you have, the more you can make.  It’s all about building the NUT large enough so that when you make a fortuitous 10% return, you’re pulling in an extra $50,000-$100,000 on your $500,000-$1 million portfolio.  Get going so you can have more significant returns.

If you aren’t on retirement track based on my 401k age chart and disagree with my figures, just do the math YOURSELF and see whether you’ve saved enough to retire on. I don’t think you’re going to like the results.

There’s one question that kept coming up over and over again, and that’s, “How can I save so much, if I don’t make so much?” It’s a fair question that needs addressing.

One commenter mentioned my table must be of “California Currency”, which made me chuckle. The problem of not making enough and therefore not being able to save enough is an honest problem which I’d like to address via a change in mindset and a chart.

How To Save For Retirement If You Don’t Make Much Money

Here are the various ways to save more for retirement, especially if you don’t make much.

1) If you don’t find it painful saving money, you’re not saving enough.

If you’re not sweating at the gym and your muscles don’t feel sore the next day, you might as well go eat a double cheeseburger with a milkshake and fries because you’re just wasting your time. The same goes with saving.

Since you’re in the lower income bracket, savings is not supposed to be easy. If you’re not feeling the disposable income pinch of putting away, 20%, 25%, 35%, 50% of your income into your 401K, IRA, or savings account, you simply are not saving enough.

You need to feel the pain, so you are forced to change your spending habits. Here’s how much I think you should have accumulated by age.

2) Recognize that you are not rich.

For whatever reason, you do not make a lot of money. It could be by choice (messed up in school, less lucrative field) or misfortune (laid off, accident, starting over). Once you recognize you are of lower income, you’ve got to come to grips with the fact that retirement is not going to be filled with milk and cookies.  

Think tasty water and crackers instead. You’re going to be working longer and harder than others. You’ve got to save more than your wealthier friends simply because you have less.  

If you only make $50,000 a year, what on earth are you doing driving a $25,000 car? That’s 50% of your gross income, and around 65% of your net income!

If you guys only earn a combined $70,000 a year and have a child, what are you doing living in a 3 bedroom apartment that costs $2,500+ a month? Downsize to a two bedroom apartment and save the difference. A family of four in Tokyo live in 600 square foot, 2 bedroom apartments!  Don’t act rich, because you are not.

3) Do the math to save more for retirement.

One commenter asked how he can put away $17,000 a year in his 401K and then another $5,000 in his traditional IRA if he “only” makes $70,000 a year. I told him to do the math. He did the math, and he did it all wrong!  This is what he calculated:

70k – 17k (401K) = 53k —> Fine. 
53k * 0.4 (taxes)= 31.8k —> 40% tax rate on a $53,000 income?
31.8k * 0.2 (after tax) =25.4k —> What’s this extra 20% tax?
25.4k-5k (Roth) = 20.4k —> Why contribute to a Roth after tax, when you can contribute to a traditional IRA pre-tax?
20.4k/12 = 1.7k per month. —-> Wrong.  Should be around $35,500 net = $2,960/month, 74% more than what is stated.

The effective tax rate on a $53,000 income is around 17%. Add on 9% state tax, and at most he’s around 26%. His Roth deduction is fine, if he doesn’t want to contribute $5,000 in a traditional pre-tax.

However, I always recommend paying less taxes than more. I am shocked how little people understand what their effective tax rates are, and the difference between pre-tax and post-tax contribution. Do the math people. You have more than you think!

4) The new normal is a lower rate of return.  

Anybody telling you to input more than a 6% constant rate of return on your investments is being too aggressive. The days of 8%+ portfolio returns are gone in an environment of 4% long-term treasury yields. 

There is an inextricable link to fixed income and equities, and baking in more than a 2X return over the risk-free rate is a stretch. We can increase our assumptions once we see an uptick in inflation, corporate earnings, and risk appetite, but not now.

5) Realize that making more money is a choice, especially if you live in a developed country. 

According to one researcher, it only takes around $34,000 to be in the top 1% of world income earners. Meanwhile, $33,000 so happens to be the middle line between the top 50% and bottom 50% of US income earners. You have a choice to work more than 40 hours a week to get ahead.

You have a choice to have as many or as little kids as you wish. Start a business and make extra income on the side if you want to. Get in before everyone and leave last, while proposing new profitable ideas for your company.

You don’t have to be a top income earner, you just have to make enough to be happy and save.  We live in a free country, not North Korea.

6) Accept bigger government. 

Massive government spending is now the norm, especially post pandemic. Social welfare programs, unemployment insurance, affordable healthcare, and low taxes continue for the middle class.  

By raising taxes on “the rich”, the current administration is effectively redistributing wealth to lower income individuals through government programs.

Republicans are more focused on cutting spending to balance the budget, and not raising taxes given our system already has a progressive structure already. Both systems have its merits and flaws, but if you are making under $200,000 and your retirement accounts are light, from a financial point of view, you’re better off voting for the incumbent. At least you know what you’re getting.

For a healthier retirement, your goal is to focus on building your net worth over your income. Income is taxed heavily, your net worth is not until your estate surpasses the net worth threshold. When it does, expect to pay a ~40% death tax rate.

Now that you’ve changed your mental outlook, here’s a proposed savings chart I developed to slowly turn the screws so that you get to your retirement goals.  Here are some following assumptions:

7) Don’t be too proud to work jobs that you think are beneath you

One of the easiest ways to save more for retirement is to make more money. You might be capped out at making and saving money from your day job, but that doesn’t mean you can’t take on side hustles to make more money.

For example, I play pickleball with a fella who makes $140 an hour teaching pickleball to three people. He works six hours a week on average and makes $840. Not bad for a side hustle. That’s over $3,200 a month in extra income he gets to save and invest.

Don’t let pride get in the way of doing whatever is necessary to take care of your family. For example, even with a multi-million dollar net worth, I gave over 500 Uber rides to earn extra income. Today, with cash flow tight after buying a forever home, I’m going to do some part-time consulting to boost my savings.

8) Dollar cost average into stocks and real estate

If you don’t make a lot of money but want to save for retirement, practice dollar-cost averaging (DCA). DCA is where you regularly invest a certain amount no matter the price. This way, you can buy more shares with prices are low and fewer shares with prices are you.

Not only can you easily dollar-cost average into a stock or S&P 500 index fund, you can also dollar-cost average in real estate. Fundrise, for example, has only a $10 minimum to invest in its private real estate funds. These funds invest primarily in the Sunbelt region where valuations are lower and yields are higher.

I’ve been dollar-cost averaging into Fundrise and other private real estate platforms since 2016. The reason is because I believe in the long-term demographic trend of moving to lower-cost areas of the country thanks to technology and being able to work from home.

Assumptions for the chart:

* No matter what your income level, you are saving some money. Develop the savings habit early and always.

* Your goal is to ultimately save at least 25X your annual expenses, or between 15 – 20X your annual average gross income for the past three years to achieve financial independence. If you can get there before 65, great! The sooner the better.

* It’s important to keep your rate of spending slower than your income and savings growth. Don’t let lifestyle inflation derail your plans.

* After you have maxed out your 401K, save an additional 20% or more in your after-tax investment accounts. Having liquidity is important if you want to retire sooner.

* If the amount of money you’re saving each month doesn’t hurt, you’re not saving enough!

Financial Samurai 401(k) Retirement Savings Guideline

401k savings targets by age


The good thing about not making much money, is that you are used to living on not much money, and therefore you don’t need much money to retire on!  With the above assumptions and chart, I hope I’ve provided a guide for those who have wondered how they can save so much if they don’t earn much at all.

Savings should be an automatic way of life. Always save money before you pay yourself. Sure, legislation such as the SECURE 2.0 Act will help people save more. But don’t depend on the government. This way, you will always operate in the confines of your disposable income.

Increasing How Much You Want To Save for Retirement Is A Choice

Another good thing about retirement is that when you are retired, you do not have to save for retirement. That 5-35% savings rate I discuss in my charts disappears, making you suddenly that much richer.  

Meanwhile, you’ve hopefully paid off all your debts, and can live in your home mortgage-free for the rest of your life.  But, even if you still have a mortgage, or are renter, with the above system, you should still have enough money to support you until the end.

Please try not to make excuses for why you cannot save even just 5-10% of your pre-tax income in your 401(k). I lived in super expensive Manhattan on $40,000 a year and managed to put away $15,000 into my 401K. $40,000 in Manhattan is like $35,000 in San Francisco, and only $25,000 in the MidWest. Financial independence on a modest income is possible!

You just have to make a choice whether you want to build a safety net for your retirement or not. Hopefully you will continue to make more money the longer you work, making saving more money easier and easier. You’ll wake up 10 years from now and amaze at how much money you’ve managed to accumulate.

It’s really up to you. Save more for retirement and live the good life when you’re older or not. See you at the beach!

Wealth Building Recommendation

One of the best way to become financially independent and protect yourself is to get a handle on your finances by signing up with Empower. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize your money.

Before Empower, I had to log into eight different systems to track 25+ difference accounts (brokerage, multiple banks, 401K, etc) to manage my finances on an Excel spreadsheet. Now, I can just log into Empower to see how all my accounts are doing, including my net worth. I can also see how much I’m spending and saving every month through their cash flow tool.

A great feature is their Portfolio Fee Analyzer, which runs your investment portfolio(s) through its software in a click of a button to see what you are paying. I found out I was paying $1,700 a year in portfolio fees I had no idea I was hemorrhaging! There is no better financial tool online that has helped me more to achieve financial freedom. It only takes a minute to sign up.

Finally, Empower has an amazing Retirement Planning Calculator that pulls in your real data and runs a Monte Carlo simulation to give you deep insights into your financial future. Empower is free, and less than one minute to sign up. Ever since I started using the tools in 2012, I’ve been able to maximize my own net worth and see it grow tremendously.

Personal Capital Retirement Planner Tool

Diversify Into Real Estate

One of the best ways regular people can build wealth is to invest in real estate. Real estate generates income, is tangible, and provides utility. Over time, real estate tends to outperform most asset classes as a result. I highly recommend everyone get at least neutral real estate by owning your primary residence. This way, you go up and down with the market.

To invest in real estate without all the hassle and unexpected costs, check out Fundrise. Fundrise offers funds that mainly invest in residential and industrial properties in the Sunbelt, where valuations are lower and yields are higher. The firm manages over $3.5 billion in assets for over 500,000 investors looking to diversify and earn more passive income. 

Another great private real estate investing platform is Crowdstreet. Crowdstreet offers accredited investors individual deals run by sponsors that have been pre-vetted for strong track records. Many of their deals are in 18-hour cities where there is potentially greater upside due to higher growth rates. You can build your own select real estate portfolio with Crowdstreet. 

I’ve personally invested $954,000 in private real estate since 2016 to diversify my holdings, take advantage of demographic shifts toward lower-cost areas of the country, and earn more passive income. We’re in a multi-decade trend of relocating to the Sunbelt region thanks to technology. 

Both platforms are long-time FS sponsors and FS is currently an investor in a Fundrise fund.